A great way to gauge the investor sentiment of a particular stock is to look at the percentage of the company's freely available shares that are short sold.
Shorting, also known as "to go short" or "short-selling" is one way in which investors can profit from a decreasing share price. Short selling is essentially the opposite to the long term buy low, sell high strategy, whereby the investor aims to sell the shares at a high price and re-purchase them later at a lower price, profiting from the difference.
A high percentage of shares sold short indicates that there are plenty of investors out there that believe the share price will fall.
Top 10 Shorted Stocks
| Company | % of shorts |
| Myer Holdings Ltd (ASX: MYR) | 18 |
| Metcash Limited (ASX: MTS) | 17 |
| Monadelphous Group Limited (ASX: MND) | 14 |
| Fortescue Metals Group Limited (ASX: FMG) | 13 |
| Mineral Resources Limited (ASX: MIN) | 12 |
| Orica Ltd (ASX: ORI) | 12 |
| Primary Health Care Limited (ASX: PRY) | 12 |
| Cardno Limited (ASX: CDD) | 12 |
| UGL Limited (ASX:UGL) | 11 |
| Flight Centre Travel Group Ltd (ASX: FLT) | 10 |
The table above paints an interesting picture about the way investors feel the market and individual stocks are heading. Last time we looked at the list it was dominated by retailers but now mining-related companies are everywhere!
Iron ore miners Fortescue, Mineral Resources and Atlas Iron have all been targeted as a result of the 50% fall in the iron ore price over the last 12 months, while Monadelphous, Orica, Cardno and UGL are all suffering from investors believing times will continue to get tougher for companies that operate in the mining services space.
Similarly, trading has been extremely tough for retailers Myer and Metcash over the last 12 months as low-cost rivals have taken market share, eroding margins and slashing revenue. Investors are betting that there's no near-term recovery in sight.
And then there are the one-offs:
An interesting addition to the table is Flight Centre, a company that has been a terrific investment over the last 10 years and continues to expand its business overseas. Investors are betting that a lower Australian dollar will discourage overseas travel, lowering margins and profit growth. Whether this will happen is anyone's guess but studies have shown a poor correlation between a low Australian dollar and overseas travel in the past.
Primary Healthcare's inclusion in the table appears to be a result of reduced margins during the February half-year report, and ongoing uncertainty about the three-year freeze on Medicare rebates for GPs and the current pathology agreement negotiations.
Pick a stock with better sentiment
